Analytics for the Internet of Things (IoT)

An example of making a value decision

To illustrate the example, we will walk through a business situation and then some R code that simulates a cost benefit curve for that decision. The code will use a fitted predictive model to calculate the net savings (or lack thereof) to generate a cost curve. The cost curve can then be used in a business decision on what proportion of units with predicted failures should have a proactive replacement.

Imagine you work for a company that builds diesel-powered generators. There is a coolant control valve that normally lasts for 4,000 hours of operation until there is a planned replacement. From analysis, your company has realized that the generators built two years prior are experiencing an earlier than ...